This action might not be possible to undo. Are you sure you want to continue?
a great deal of system externality to the benefits of network users and can persist even in the face of technically superior competing networks. For many products, one consumer’s utility from using the products is not dependent on how many other consumers also use them. For other products, one’s choice of which products to buy and use critically depends on how many other consumers also use them. These products thus generate external effects that must be taken into account in consumer choice. One class of these products either shares the same universal standards or must be used in large networks. For example, computer networks and telecommunications systems are typical of these products. Three issues are involved in consumer choice (and thus producer choice) among systems; namely, expectations, coordination, and compatibility. In a communications network, the network is more useful the more users use it. In the case of a fax machine communications system, if each consumer expects no other consumer will purchase a fax machine, then no one will purchase it. On the other hand, if each consumer expects that a large number of other consumers are going to purchase fax machines, then many would purchase fax machines. This then is the pure expectation issue. But hardware alone does not make a network work unless there is enough software to justify the purchase of the hardware. For example, a firm contemplating whether to develop and release a new architecture of microprocessor, for example, must know whether software will be provided to work on the new microprocessor. Such coordination between producers of complementary products compounds the difficulty of consumer choice in adopting networked products. Once the network achieves a threshold size, its continued expansion is built on the emergence of compatible products. The more compatible products there are, the bigger the network grows. And the bigger the network grows, the more compatible and cheaper products will be offered. This process of positive feedback is fueled by the increasing extent to which external benefits of individual adoptions can be internalized among users of the network. Thus, once a network has established its dominant position, any new products that are not compatible with this dominant network will be rejected no matter how technically superior they might be. Any new products incompatible with the dominant system must compete not with individual products of the dominant system, but with all the internalized benefits of an established system. While internalized network externality is formidable, it is not unbreakable. One possibility is that the sponsor of a competing network can indirectly commit itself to a price path involving “competitive” second-period prices by opening the market to independent suppliers of complementary products. Another way is to commit a major
asp?docID=151 Term quasi-public good Definition: A good that is easy to keep nonpayers from consuming.if the good is provided for one person. and thus you can charge them a price for consuming. . or perhaps. Such goods are therefore not pure public goods. For this reason it is not impossible to charge for the provision of lighthouses. From an efficiency view. Also termed a near-public good. This mixture of nearly unlimited benefits and the ability to charge a price means that some quasi-public goods are sold through markets and others are provided by government. then the market could in theory provide a price mechanism for it.” Journal of Economic Perspectives 8 (2): 93-115. if the consumption of a good can be excluded. We have seen that a public good is one for which it is not practical to exclude consumers. & C. lighthouses. Ships who do not wish to be charged could avoid the lighthouse. Casual observation suggests that one reason that the IBM PC (a new system challenging the established CPM system) was so successful is that consumers expected the product to succeed since it was backed by the reputation of IBM! References: • Katz. Street lighting. 1994. However. though still impractical. but there is no real good reason to do so. Ships approaching within a certain radius of a lighthouse could send out an identifying radar signal. however impractical. but use of the good by one person does not prevent use by others. “Systems Competition and Network Effects. and are consequently called quasi-public goods. Source: http://opus1journal. it is provided for all. none should be sold through markets. would be an example. Shapiro.org/articles/article.L. A pure public good is one where it is impossible to exclude some consumers . the more people who consume a quasipublic good. The ship owners could be charged for getting close to the lighthouse. For efficiency's sake. the better off society. Law and order would be an example.asset to guarantee the viability of a competing system.the trick with a quasi-public good is that it is easy to keep people away. M.
At the very least the publishers can collect from the first purchaser of the book. some lighthouses flash in specific on-and-off patterns. But this is inexact. All ships that come within sight of it benefit from it. Is it an information product? Yes. And publishers are to some extent able to collect from those who benefit from the book. But in other cases. Economists have traditionally argued that. Well. They are not public goods because an information good cannot be transfered without at the same time transferring the medium. the medium -.is itself a public good. In the case of the lighthouse. A light per se may not be considered a symbol. because of these characteristics. not the information product. to make it easier to identify them. "a 1) The cost of providing the good does not depend on the number of consumers who benefit from it. government must supply them. The cost of maintaining the lighthouse is a fixed cost. it would do no good. be difficult to intercept ships as they come within range of the lighthouse and demand that they pay a toll for using it -. and would correct their course to avoid the danger -.light -. This is symbolic in the strictest sense.getting the benefit without paying! So the lighthouse fulfills the definition of a public good. and does not depend on the number of ships that benefit from it. . It would. Since the information product can only be sold in conjunction with some medium.but even if it were done. but in the context of a map (which is symbolic) and a route plan. the information product is a public good only if the medium is a public good. in general. public goods? The answer is no. The definition of of a public good public good" has two characteristics: in economics is narrow. the medium (paper) is not a public good. The ships would know their position simply because they were asked to pay. We may use Adam Smith's example of the lighthouse to illustrate this concept. Moreover. 2) It is not feasible to exclude those who do not pay from the benefit of the good.Information as a Quasi-Public Good The difficulties in providing efficient incentives for the production of information products through property rights lead some people to say that information is a public good. public goods will not be supplied by a profit oriented market economy. then: are information products. such as books. In economic theory. the light takes on a (symbolic) meaning it would not have out of context. The lighthouse exists to warn passing ships of a dangerous shoal or coast. and the light is the medium. at best. If they are to be supplied at all.
1a) The cost of providing the good increases at least proportionately to the number who benefit from it." since they share the characteristics of public goods to some extent. in that costs increase almost in proportion to the number of beneficiaries and the difficulty of excluding non-payers is slight. though. Also. Source: http://faculty. For quasi-public goods. An example of a pure private good is a potato. Some quasi-public goods will come nearer the public end of the spectrum. in that costs increase much less the proportionately than the number of beneficiaries and the difficulty of excluding non-payers is quite considerable. I can benefit from it only if I pay. the farmer can demand that I pay for the potato before I take it home -.edu/McCainR//top/prin/txt/infoch/inf11. you cannot. and it will cost twice as much (or more) to double the production of potatos. unlike pure public goods. These two conditions are relative.lebow. Thus. and may make things worse in some cases. the greater the incentive problem is. It seems clear that information products typically are not public goods but are quasipublic goods. The nearer the good is to the public end of the spectrum. We might define purely private goods by negating the two characteristics of public goods given above: For purely private goods. The greater its "degree of publicness" is.drexel. Pure private goods are at the other end of the spectrum from pure public goods.so. It seems likely that the trend of technology has been to increase their degree of publicness. Nevertheless.But there is an important middle ground between public goods and purely private goods. The intermediate category we may call "quasi-public goods. Their degree of publicness varies widely. and changes in technology (media) can change the degree of publicness. 2b) There are some difficulties in excluding those who do not pay from the benefit of the good. If I eat the potato. government provision will not be necessary in most cases. 1b) The cost of providing the good increases less than proportionately to the number who benefit from it.html . unless I steal it. most information products continue to be supplied by profit-oriented private business. the greater its "degree of publicness" is. 2a) It is always feasible to exclude from the benefit of the good those who do not pay for it. Other quasi-public goods will come nearer the purely private end of the spectrum.
This action might not be possible to undo. Are you sure you want to continue?
We've moved you to where you read on your other device.
Get the full title to continue reading from where you left off, or restart the preview.